Join us in this three part series on Canada's financial perspective featuring blogs on the (1) Mortgage Rate Outlook (2) Economic Outlook and (3) Interest Rate Outlook

Interest Rate Outlook

The Agreement between the Bank of Canada and the Goverment of Canada for the Inflation-Control Target was renewed in 2016. The Bank of Canada has a mandate to keep an inflation-control target range of 1-3% with 2% as being the midpoint target over the medium-run. This target is the year-over-year increase in the total consumer price index (CPI) which is the most relevant cost of living measure for most Canadians. Keeping the inflation target in mind, the Bank of Canada has to maintain a delicate balance given the current state of the economy as well as inflation trending near its target

The low oil prices have taken a snowball effect as it continues to increase unemployment in energy producing provinces while simultaneously causing a weaker Canadian dollar which in turn makes the cost of imported goods more expensive. The BCREA expects a continued weak economic growth for the first quarter. However, with "the possibility of an effective fiscal stimulus, a stronger US economy and a stabilization of oil prices points to stronger growth ahead" (BCREA, 2016).

"After standing on the sidelines for years, the Bank unexpectedly cut its benchmark [interest] rate twice last year in an attempt to stimulate a Canadian economy waylaid by low oil prices" (CBC, 2016). Since then, there have been some signs of improvement. There is potential for the Bank of Canada to reduce rates once more in 2016 although the BCREA's expectation is that the Bank will remain on the sidelines throughout the year. The Bank of Canada has elected to keep its benchmark lending rate at 0.5%. In a broad sense, the Bank will reduce rates when the economy needs to be stimulated or alternatively, would increase rates when it needs to pump the brakes on inflation. 

Source: British Columbia Real Estate Association + CBC Business

Thanks for joining us in this three part series on the Canadian Financial Outlook. For all your real estate needs, contact Amalia Liapis at amalia@wesellvancouver.ca or alternatively, at 604-618-7000.

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Join us in this three part series on Canada's financial perspective featuring blogs on the (1) Mortgage Rate Outlook (2) Economic Outlook and (3) Interest Rate Outlook

Economic Outlook

Looking back at 2015, the first half of the year saw negative growth but looking at the big picture reveals a registered economic growth of 1.2%. Multiple factors attributing to the slow economic growth in 2015 has trickled into 2016 as well such as the low oil prices and the related adverse effects on income and job growth. With the newly elected federal government in place, there is an effort to utilizing old-fashioned fiscal policy in order to boost economic growth.

The range for the estimate of the fiscal multiplier for Canada ranges from 0.5 to 1.5. The fiscal multiplier is a ratio that shows the effect of government spending on economic activity. However, the level of impact of fiscal policy is highly interdependent on the state of the economy. BCREA's current forecast for the Canadian economy is for economic growth of 1.6% in 2016 and 2.5% in the following year, taking into account the impact of expansionary fiscal policy. 

Source: British Columbia Real Estate Association

Stay tuned for the last part of the blog series where we'll dive into the Interest Rate Outlook. For all your real estate needs, contact Amalia Liapis at amalia@wesellvancouver.ca or alternatively, at 604-618-7000.

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Join us in this three part series on Canada's financial perspective featuring blogs on the (1) Mortgage Rate Outlook (2) Economic Outlook and (3) Interest Rate Outlook

Mortgage Rate Outlook

The financial markets have seen tremendous volatility thus far with record low oil prices with consumers and investors being more risk averse as a result. This risk aversion has overwhelmed any potential pressure on yields from bonds that may have arisen due to the US Federal Reserve tightening the monetary policy. In Q1 of 2016, Canadian bond yields dropped to a low of 0.48% but have bounced back to 0.8%. Bond yields may continue to see a rise due to the anticipation of economic growth towards year end. 

Despite the volatility in the financial market, there is a silver lining for home buyers as it is keeping the mortgage rates low for the time being. Take a look below at the forecasts for both 2016 and 2017. The one-year mortgage rates are seeing a slight increase towards Q4, however, the five-year rates are expected to be stabilized at 4.64% for the entirety of 2016 which is good news for home buyers! 

Note: Rates are based on an average of weekly rates
Source: British Columbia Real Estate Association


Source: British Columbia Real Estate Association


Stay tuned for the next part of the blog series where we'll dive into the Economic Outlook. For all your real estate needs, contact Amalia Liapis at amalia@wesellvancouver.ca or alternatively, at 604-618-7000.

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From a macro perspective, Canada's economy is going through a rough patch and growth is slowing down. Several variables contribute to this such as the equity markets being off to a historically bad start, the weak Canadian dollar and the oil prices struggling to find a floor. On the bright side, looking at BC's economy allows us to let out a bit of a sigh of relief. There seems to be a multitude of indicators that provide British Columbians with a glimmer of hope as these indicators point to significant momentum underlying our provincial economy.

The pace in which consumer spending and retail sales grew last year was the fastest pace in close to a decade. This key indicator proved to be the largest component of BC's economy. As a result of this, this growth largely reflected markedly improved labour market fundamentals. While employment growth has seen sluggish growth for the past few years, the last six months of 2015 proved to be a stark contrast. Growth was moving at more than a 2% rate over the latter half of the previous year. Full-time employment seeing an increase was the driver spearheading the growth seen.

With the growth demonstrated, it is no surprise that British Columbians were in a spending mood. Not only did consumption goods see an increase in sales but larger paychques and confidence in the BC economy resulted in the third highest year on record for provincial home sales. With the relative strength of the economy in BC, it is no wonder why we are seeing more interprovincial migration with workers moving to BC. Since 2013, there has been a net inflow of more than 30,000 people from other provinces, resulting in population growth and adding to an already strong housing and consumer demand.

With a strong housing demand comes a record low supply of re-sale and new housing in BC. Developers reacted to this lack of supply by breaking ground on over 30,000 new housing units last year making it the highest number of housing starts since 2008. All in all, BC's economy is forecasted to continue being a growth leader in Canada for this year and the years to come.

Source: BCREA Economics - Brendon Ogmundson

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Want a way to measure home price trends in a chosen area? MLS has designed a tool that does just that. The MLS Home Price Index (HPI) allows users to measure home price trends in the Greater Vancouver region and other major markets in the country. The HPI follows a similar concept to the economic tool called the Consumer Price Index (CPI). With the HPI, it measures inflation or deflation as well as the change in the price of housing features. It "tracks price levels at a point in time relative to price levels in a base (reference) period for one- and two-storey single family homes, townhouse/row units and apartment units". 

The MLS HPI model is typically utilized to calculate Benchmark Prices. A "benchmark home" is one with similar attributes to those in the surrounding area in which it is located. Relative Benchmark Prices measure the percentage by which the Benchmark Price in a particular area and category is in relation to the overall market at any specific point in time.

The tools put out by MLS are there at your disposal and for your convenience. Check out their website here for all these handy tools. For all your real estate needs, contact Amalia Liapis at amalia@wesellvancouver.ca or alternatively, at 604-618-7000.

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2015 was the strongest in the past few years with 102,517 MLS residential sales. Economists believe that this year will follow suit with strong consumer demand, however, with a slight 6.2% decline in sales bringing it under the 100k mark to a projected 96,100 units in 2016 and 98,000 units in 2017. A visual representation of BC's MLS Residential Sales are shown below starting from 2005 to 2017F. 

BC's relatively robust economy coupled with strong net interprovincial migration has subsequently led to the strong housing demand that we have been seeing. Residential sales over the next two years are projected to remain well above the ten-year average of 83,200 units. In addition to strong housing demand, the average MLS residential price in BC is forecasted at $677,200 (6.4% increase) in 2016 and a further 4.1% to $705,300 in 2017.

"The inventory of homes for sale is now at its lowest level in almost a decade," said Cameron Muir, BCREA Chief Economist. "Fewer homes for sale and strong consumer demand are expected to push home prices higher in most BC regions this year and in 2017." 

In line with the strong housing demand and low inventory levels, new home construction activity is expected to be on the rise to combat the issues of not having enough inventory to supply the high demand. This issue is particularly present on the South Coast. 

For all your real estate needs, contact Amalia Liapis at amalia@wesellvancouver.ca or alternatively at 604-618-7000.

Source: BCREA  Economics

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Investment in commercial real estate is a great way to enhance the value of your portfolio. Take a hold of this rare opportunity to OWN waterfront commercial space along Beach Avenue! Contact Kris Hall today at info@wesellvancouver.ca or alternatively at 604-716-6155 for additional information on this listing.

EDIT: As of January 14, 2016, the property has been SOLD! 

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With the booming real estate market in Vancouver, it is no doubt that prices have appreciated due to the high demand. What's interesting is the asymmetrical price appreciation seen in the housing market. More expensive properties are seeing prices rise at a faster rate than those of their less expensive counterparts. Price gaps seen between houses, condominiums and detached homes are beginning to widen with Vancouver leading the biggest home price gap increases within Canada. This could be the result of foreign investment activity in Vancouver, especially within the luxury market segment. Housing priced in the higher end of the spectrum are more vulnerable to price adjustments.

The asymmetrical price appreciation has been evident in Vancouver for the past ten years which is predominantly caused by the rapid price increase of luxury homes. Housing prices have seen an overall increase, however, luxury home prices are leading the pack with the rate of increase nearly quadrupling the rates of those in the lower end of the spectrum. Homeowners within the move up market are primarily affected by this asymmetry. This phenomenon is limiting the ability for homeowners to "move up" into a bigger home and is even affecting first-time homeowners as well.

As a result of the inability to move up, homeowners are beginning to invest more in renovations as it is seen to be a more cost effective measure. Stay tuned for our next blog which tackles the issue of how to renovate your home while remaining on budget. For all your real estate needs, contact Amalia Liapis at amalia@wesellvancouver.ca or alternatively at 604-618-7000.

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Our last blog took a look at 2014 statistics in the realm of commercial real estate. Today we'll be exploring statistics for 2015 thus far. As noted in our last blog, commercial land sales have driven sales activity for the first quarter. It has been an upward trend for the past four years in terms of dollar value in land sales.

“It was the most active first quarter we’ve seen in our commercial market over the last five years,” Darcy McLeod, REBGV president said. “This activity reflects the growth we’re seeing in related sectors within our economy such as retail and manufacturing.”

Below you will find a comparison chart of Quarter 1 commercial real estate activity by category for the years 2014 and 2015. As you can see, the number of sales has seen an increase from 2014 to 2015 whereas the dollar value for each respective category has increased in some categories and decreased in others.

Category Classifications

Land - Includes properties that are holding properties, farmland, garden centres, redevelopment sites, land assembly sites, vineyards, etc.

Office and Retail - These properties are defined by the zoning according to each municipality and must have a building on the site. This includes office, office condo, retail, retail condo, shopping centre, gas station, car dealerships, banks, community centres, daycares, educational facility, institutional, golf courses, movie threatre, hotel, churches, restaurants, truck stops, etc.

Industrial - These are defined by the zoning according to each municipality and must have a building on the site. This includes warehouses, warehouse bays and multi-bay warehouses.

Multi-Family - These include nursing homes, high rises, low rises and any condo or townhome properties containing four or more units with at least one zoned for commercial use.

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The Government of Canada has implemented a balanced budget which serves the purpose of supporting a diversified economy and advancing economic growth for the country. Following the 2008/2009 financial crisis, the Canadian government has been steadily moving towards a balanced budget with a $1.4 billion surplus in 2015-2016. Despite the move towards a balanced budget, the Business Council of BC is still preceding with caution due to the slow global growth currently exhibited, the drastically low oil prices and the overall weakness in other commodity markets. The cautious approach for the Canadian economic outlook has subsequently resulted in a significant decline in the nation's overall terms of trade. April 2015 saw a decline in Canadian exports of 0.7% in April and a 2.5% decline in its imports.

What Does a Balanced Budget Mean for Canadians?
» More tax cuts for hard-working families and less debt for future generations
» Taxpayer dollars are used to support the programs Canadians depend on - rather than paying interest costs
» Preserves Canada's low-tax plan and allows for further tax reductions, fostering growth and the creation of jobs for the benefit of all Canadians
» Strengthens the country's ability to response to longer-term challenges, such as unexpected global economic shocks
Source: Government of Canada

"Current indicators suggest the Canadian economy stalled in the first quarter of 2015, household debt is at an all-time high relative to income, and business investment remains very sluggish," notes Jock Finlayson, Executive Vice President and Chief Policy Officer, Business Council of British Columbia. "For 2015 as a whole, we expect Canada to post relatively feeble real GDP growth of under 2%, with some improvement likely in 2016, provided the US economy continues to gain momentum."  

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With a major decrease in Canadian bond yields to 0.52 as of March 27, 2015. The plummet in bond yields is in part due to the surprise rate cut at the Bank of Canada's meeting in January. In spite of that, posted mortgage rates have moved slightly lower and banks passed through only a partial amount of the 25 basis point rate cut to prime rates that govern variable mortgages. The forecasts for future rate decisions have seen fluctuation. The five-year bond yield hit a record low of 0.59% but has since rebounded. The five-year fixed mortgage rate is currently at 4.74% which may be the absolute floor. The 0.75% decline in the five-year bond yield translated to only a 0.04% reduction in the qualifying rate.

It may be a while before mortgage rates move substantially higher. The mortgage rate forecast for 2015 and 2016 are shown below. Projections show that mortgage rates will continue to stay at historic lows for the remainder of the year. As the Canadian economy rebounds from the decline in oil prices and if the US Federal Reserve begins to tighten in the summer months, we may see some upward pressure on long-term interest rates in the last quarter of this year and into 2016.


Source: Bank of Canada, BCREA Economics



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As a collective whole, Canadians are united in their definition of home. A recent survey done by Century 21 reveals the top 10 ways Canadians define home which is seen below. The question posed was, "In about five describing words or less, what does "home" mean to you?". The major themes that came up had a lot to do with family, comfort and safety. The personal value of a home is deeply rooted in Canadian culture and the personal definition of home is one that resonates with most Canadians. 

 

British Columbians are the only province to include a social aspect to their definition of home by including "friend" in their top 10. The only region to list a practical term, "investment", in their top 10 was Quebec. Lastly, Ontario residents take the cake for being most creative with nearly 90 different definitions of home. Some humorous definitions of home included: escape from people, sweatpants, kitty, no strata fees and awesome. At the end of the day, regardless of where you habituate, home is where the heart is.

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Mortgage rates currently remain at historically low rates, however, they are expected to increase in the last quarter of the year and will continue to increase into 2015. It is sitting at 3.14% (for a one-year term) and is forecasted to stay stable in this upcoming quarter. As per the BCREA, the mortgage rate forecast is as follows:


*Data is average of weekly rates. Source: Bank of Canada.

In response to bond yields seeing a downwards trend, lenders have offered historically low mortgage rates, which is great news for homebuyers.

Economic Outlook
In relation to Canada's economy, its weak start was quickly overturned by strong economic growth in the second quarter with a 3.1% real GDP increase. This growth was largely attributed to the number of exports. It is expected that the economic growth will remain relatively strong. 

Interest Rate Forecast
The current labor market is still seeing high unemployment rates and unstable employment growth. The BCREA expects that the Bank of Canada will "continue to take a cautious approach to monetary policy until it sees concrete signs that the economy is growing sustainably above trend". It is predicted that the Bank will lower interest rates however, a tighening of interest rates are forecasted for the second half of 2015.

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